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The role of management accounting

Contents:


What is management accounting?

In the context of an increasingly complex business and investment environment, the role of accountants, in general, is increasingly enhanced. Not only focusing at financial accounting, which provides information to external parties, management accounting has the function of providing information for leaders for reference before making decisions to operate , business management is gradually more concerned.


The field of Management Accounting, commonly referred to as Management Accounting or Corporate Accounting, covers the financial and accounting tasks required to operate a business. Management accountants work in companies and organizations to direct internal financial processes; monitoring expenses, sales, spending, and budgets; perform audits; identify past trends and predict future demand, and assist company leadership in financial decisions.


Management accounting is often confused with financial accounting, while both provide valuable services to an organization, there is a key difference between the two roles. Management accounting is mainly involved in completing tasks and reports, informing the company's management about financial decisions related to the overall operations of the company. The key point of financial accounting is on informing external groups — such as banks, boards of directors, shareholders, and tax authorities — about a company's financial health.


Nevertheless, in Vietnam, management accounting has not really received the proper attention of businesses, so it does not maximize its role. Although Accounting Law has a definition of management accounting which is the work of collecting, processing, analyzing and providing economic and financial information according to the requirements of management and economic and financial decisions in the internal environment.


What is the difference between financial accounting and management accounting?

There are many differences between management accounting and financial accounting, financial accounting often provides information to external parties, while management accounting is intended to provide information for administrators for reference. when making decisions to run and manage the business.


Who do management accountants work with?

Management accountants work with the executive management of their organization. They analyze financial data, including risk data, and provide reports so managers can make strategic business decisions.


The role of management accountants in business

Because of the above contents, management accounting has its own specific but equally important role in business management. We can understand it as follows:


Executives have a common goal of effectively managing business operations. Day-to-day activities revolve around effective information processing and decision-making. The role of management accountants is to provide information to executives for decision-making.


Management accounting information is especially important in the process of operating a business. Each management accounting information obtained is the result of a two-way process: information and inspection. Therefore, when it comes to management accounting as well as management accounting information, it is impossible to separate two basic characteristics. The entire content of production and business activities, from input to output, is vividly reflected in accounting information.


The decision-making process for business operations can be described through the following steps:

  • Planning: Is an overall picture of the enterprise in the future, or overall economic indicators are built and measures are taken to achieve the expected goals. To build a plan, managers often have to predict and judge the results of economic indicators that will happen based on available scientific bases. In the construction process, managers often have to link economic indicators together to clearly see the impact of cause and effect that will occur in the future.

  • Organizing work and operating: This is the basic function of managers. This function is to communicate the planned targets that have been built to the divisions in the enterprise and at the same time organize activities in the divisions according to the approved plan. This function requires managers to link departments together, use reasonable labor resources to maximize the factors of the production process to achieve the intended goals.

  • Control and evaluate the implementation results: Based on the targets of the implementation results compared with the developed plans to check and evaluate the implementation of the results of the enterprise. Thereby to analyze and obtain information for the next business process. The essence of the inspection and evaluation process is often to compare and see the difference between the implementation and the planned plan, thereby identifying the influencing causes so that the implementation process of each person can be adjusted. , each department is intended for organizations to operate to achieve optimal goals.

  • Decision making: This is the most basic function of management accounting information. Based on collected information sources, through analysis and selection of information to make decisions for each specific activity of the business process in order to improve capital efficiency, save costs...

  • Decision-making is often based on the synthesis of many different information sources, but in which management accounting information often plays a decisive role and has high reliability. Managers are often faced with many different business plans. Each option usually includes many diverse information systems such as quantity, type, cost, profit, capital, market, etc. Therefore, it requires management accountants to synthesize, analyze and select. this information system.

Here are the main goals of management accounting:

  • Provide information to managers for planning and decision making;

  • Contributing to the development and implementation of the strategic plan of the enterprise: Planning (short term, long term), Control the effective use of company resources

  • Contributing to improving the competitive advantage of enterprises: Low cost, Different products

  • Assist managers in operating and controlling the organization's activities;

  • Motivate managers to achieve organizational goals;

  • Measure the performance of managers and their departments and units in the organization.


Professional methods in management accounting

  • Information must be comparable (most important)

  • Expense classification

  • Design information in the form of equations/graphs

Why should management accountants concern about non-financial information?

Non-financial issues such as corporate governance, risk management, business plan, compliance with current legal regulations, personnel structure, internal control department, qualifications & manager's experience, main areas of activity, market share, relations with other credit institutions, evaluation of partners & customers, ...


Non-financial information supports leaders to make accurate and timely decisions :

  • Information on the situation of trade policies, payment discounts of suppliers helps businesses to have a reasonable purchase plan and ensure the supply of raw materials for uninterrupted production.

  • Information about the market situation, competitors helps businesses have a reasonable marketing plan to make a difference in products.

  • Non-financial information to support management to control and evaluate business activities.

  • To assess customer satisfaction with products and services, use the questionnaire.

  • If the company wants to expand its business and increase revenue, it controls how R&D is performed or whether employees fully participate in advanced training classes.






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